Praxeology: My Reflexions on India

Globalization is in retreat and protectionism is again rising its head worldwide. Recently the American President Donald Trump announced that he will impose very steep tariffs on imported steel, aluminum products and cars . In retaliation the EU has threatened to impose heavy tariffs on American imports in EU. Trump is also waging a trade war with China by threatening to impose heavy tariffs on Chinese imports. In retaliation China is threatening US with heavy import tariffs too. Here in India the Narendra Modi government also imposed heavy tariff on palm oil, chickpea imports and scores of other items like kites to cosmetics to electronic goods etc., in its recent budget. Is this rising protectionism good for the Indian and the world economy? To understand this question we need to understand how our economic life works. Following brief analysis will show us what will be the impact of this rising protectionism on our lives. Economics of Protectionism Human bei...

n recently announced budget the finance minister of India Mr. Arun Jaitley launched an ambitious government healthcare program. He dubbed it as Modicare like Obamacare in America, which the present President of USA Mr. Donald Trump is trying to dismantle. This new program, which is touted as the biggest healthcare program in the world, will raise the insurance coverage per family from present annual 30,000 rupees to 5 lakh rupees and will cover 50 crore people, which represents almost 41% of total Indian population. Notwithstanding the myriad of benefits cited by the ruling government and news outlets, we need to be aware of wide economic, social and cultural impact of such government schemes. Firstly, the economics of this program will require vast amount of resources, which the government doesn’t have right now. This will necessitate the government to impose new taxes on already burdened tax payers of India. Due to the high tax regime thousands of ultra-rich ...

Which factors determine country’s economic development? Development scholars have looked into this question for more than a century and they came up with different explanations like the theory of colonial victimization, dependency theory, geography and climate, institutions, culture etc. Out of these explanations the cultural explanation is fundamental. I strongly think that culture is the most important factor influencing the process of economic development of any country. I also strongly think that the twin process of biological and cultural evolution together, the gene-culture evolution, ultimately determines whether a country is going to develop or not.  This is because human beings are a product of both biological and cultural evolution. Not going into the contentious issue of genetic basis of culture and economic development, here I just want to focus on cultural factors as a determining force behind economic development. I was recently reading an article b...

Do the state (aka the government) has any right to coerce us and we have any duty to obey it? This is the question that philosopher Dr. Michael Huemer addresses in his important work, The Problem of Political Authority: An Examination of the Right to Coerce and the Duty to Obey . The answer at which Dr. Huemer arrives after logical and empirical analysis is: I shall ultimately conclude that political authority is an illusion: no one has the right to rule, and no one is obliged to obey a command merely because it comes from their government . Dr. Huemer divides his book in two parts. Part one is devoted to logically and empirically analyze various theories of political authority and part two to the discussion of how a society without the state will function. The method that Dr. Huemer uses to logically analyze various theories of political authority is to first juxtapose an action of the government in the private sphere and then see if a private individual is allowed b...

Recently the government of India raised import duty on electronic items including cellphones and TVs to allegedly boost its Swadeshi campaign of Make in India as well as government revenues (sic). Let us analyze this protectionist policy of government using sound economic laws and see if it is capable of achieving its stated goals. Economics and Psychology of Protectionism In the immediate aftermath of this hike in import duties the price of the imported electronic goods will go up choking some of the demand. This price rise will though not choke all of the demand. Those people whose price elasticity of demand is inelastic, e.g., a diehard iPhone fan, will continue to purchase these now costly imported goods. The price rise will reduce the purchasing power of their money e.g., if the iPhone was selling at 100 rupees before the 10% duty hike then it will now sell at 110 rupees. This means consumer will have to now spend more on iPhone leaving that much less...

Last Tuesday the supreme court of India expressing concern over growing commercialization of the legal profession with lawyers demanding “astronomical” fees from litigants, which made it difficult for the poor to access justice, the Supreme Court asked the Centre on Tuesday to bring a law to regulate the field and to prescribe “floor and ceiling of advocates’ fees” . Let us examine supreme court’s demand of regulating the legal profession in India using sound laws of economics. First, the concern of supreme court re commercialization of the legal profession where lawyers are demanding ‘astronomical’ fees from the litigants is quite legitimate. But after this correct diagnosis of the symptom the treatment offered by the court isn’t sound at all. In fact it is antithetical to the concerns shown by the court as we will see in a while. To understand the issue reflected in court’s concern one needs to simply ask the question, why the lawyer’s fees are astronomical ...

If Narendra Modi and Arun Jaitley get their way then when next time some bank will fail in India they will be legally allowed to confiscate all your hard earned saving, that you have deposited in that bank in the form of savings or term deposit accounts etc., to rescue themselves. Because doing so will be made legal by the government under the new bill that they are drafting, you will not be able to do anything about it once they do it! You will simply have to watch helplessly banks seize your lifetime savings. Modi government is drafting a new bill viz., the Financial Resolution and Deposit Insurance (FRDI) Bill , 2017 which will give these enormous powers to the banks and other financial corporations. In financial market jargon this method (sic) is known as ‘bail-in’. In just legal language this should be called embezzlement on a grand scale. After demonetization and GST this is another big scale confiscation scheme being devised by Modi and his ministers like Jaitley. ...